UAE's FAB seeks to buy Egypt's top investment bank EFG Hermes

DUBAI, Feb 9 (Reuters) - First Abu Dhabi Bank (FAB.AD) has made an offer to buy a controlling stake in Egypt's biggest investment bank EFG Hermes (HRHO.CA) that values the North African lender at 18.5 billion Egyptian pounds ($1.18 billion), the two banks said.

If successful, the deal would give the UAE's biggest lender access to the Egyptian investment bank's strong franchise in the Middle East and North Africa region.

It would also be FAB's second major transaction in Egypt after it bought the Egyptian business of Lebanon's Bank Audi (AUDI.BY) last year.

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FAB has made a non-binding offer to buy at least 51% in EFG Hermes for 19 Egyptian pounds ($1.21) a share, Egypt's Financial Regulatory Authority said.

Under Egyptian rules, a party seeking to buy more than a third of a listed company must make a mandatory tender offer for all remaining shares, lawyers say.

EFG Hermes said in a disclosure on the London Stock Exchange the transaction's completion and final purchase price would be conditional on the completion of "a satisfactory comprehensive due diligence" and on the required regulatory approvals.

After that, a mandatory tender offer would be made to all shareholders.

A spokeswoman for EFG Hermes said she could not say more beyond what was in the stock exchange disclosure.

FAB said in a separate statement it believes that the non-binding offer "represents an attractive liquidity event and a compelling value proposition" for EFG Hermes' shareholders.

But Allen Sandeep of Naeem Brokerage in Egypt said FAB's indicative offer price for EFG was a steep discount to EFG's fair value.

The offer implies a multiple of 1.3 times price-to-book, but almost 40% of EFG's profits originate from its high-growth non-bank financial services business (NBFS) which commands multiples of over three times, he said.

FAB wants to keep the Egyptian investment bank independent and listed on the Cairo bourse, two sources said, asking not to be named because of the sensitivity of the matter.

They said Rothschild (ROTH.PA) is advising FAB on the deal. Rothschild declined to comment.

UAE banks are increasingly looking overseas to expand as the domestic market is crowded with a large number of local and foreign banks. Emirates NBD (ENBD.DU) acquired Turkey's DenizBank in 2019 to help diversify its earnings.

EFG Hermes' stock brokerage business ranked second among 28 firms facilitating buying and selling of shares this year on the Abu Dhabi Securities Exchange, with a market share of almost 6.2%, according to market data. FAB Securities stood ninth.

On the Dubai bourse, EFG Hermes was ranked first, with an almost 16% market share, among 25 brokerage firms, whereas FAB Securities ranked seventh, market data shows.

EFG Hermes has advised on major deals including Saudi Aramco's record $29.4 billion initial public offering in 2019.

First Abu Dhabi Bank, which emerged from a 2017 merger between National Bank of Abu Dhabi and First Gulf Bank, has successfully advised on IPOs in the UAE and loan deals.

($1 = 15.6600 Egyptian pounds)

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Reporting by Saeed Azhar and Yousef Saba in Dubai and Patrick Werr in Cairo; Editing by Barbara Lewis and Louise Heavens

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